The 5 Reasons You Shouldn’t Sign a Mandatory Arbitration Clause or Jury Waiver

By Andrea Richard

But there is one way in this country in which all [people]are created equal—there is one human institution that makes a pauper the equal of a Rockefeller[.]  That institution, gentlemen, is a court.   . . .  in this country our courts are the great levelers, and in our courts all [people] are created equal.”

Atticus Finch, To Kill a Mockingbird by Harper Lee

Mandatory arbitration clauses and jury waivers are showing up more and more.  Large companies, including insurance companies, sometimes ask their customers and employees to wave one of their most important rights by agreeing to settle any disputes outside of the jury system, behind closed doors in private arbitration. Jury waivers and mandatory arbitration clauses are showing up in leases, checking account agreements, car loans and home loan agreements.  These waivers are also becoming more common in employment contracts.  We each have a constitutional right to have civil cases heard by a jury of our peers.  This is a powerful right that should not be given away without careful consideration.

Like any human endeavor, the jury system is not perfect. However, the American jury system is the best in the world.  No one can lobby, payoff, or corrupt a jury.  There are certain cases that can best be handled in a private arbitration.  However, it is unfair for companies to demand that a consumer sign mandatory arbitration clauses and jury waivers before there is even a dispute.

Don’t give up your rights before you know what the dispute is. While it is legal to ask someone to give up a constitutional right, these waivers are not in your best interest. In essence, the company is forcing you to decide how to resolve the dispute before you even know what the dispute is.

Here are the reasons we suggest you do not sign a mandatory arbitration clause or a jury waiver:

  1. Jury trials are good. The right to a jury trial may be one of your most important rights. It is your right to be heard by a jury of your peers. Juries are democracy in action. Jury trials give everyday citizens power in our government and our justice system.
  2. Arbitrations are secret. Arbitrations are held in private. Because arbitration is conducted behind closed doors, corporate behavior can remain hidden and unchallenged.
  3. Arbitration can be expensive. Many companies don’t inform consumers that arbitration can be extremely expensive. Typically, parties to an arbitration must pay for the entire arbitration proceeding, from hiring an arbitrator to paying for the hearing space.  If you proceed in state or federal court, you pay a filing fee.  The judge that considers your case is paid by the public.  In contrast, each side must pay half of the arbitrator’s fees which can be substantial.
  4. Arbitrators’ decisions are not reviewed by a judge. If you get an arbitrator that makes a bad decision or is unfair, there is little or no ability to have that decision reviewed. Juries, because they deliberate as a group and draw on their collective wisdom, are often better able to deliver justice.
  5. Arbitration sometimes favors larger institutions and companies. An individual often will not hire an arbitrator again. Most arbitrators are conscientious and try to do the right thing.  However, some arbitrators may inadvertently favor a large corporation or insurance company who could offer them repeat business.

What should you do? We suggest that you cross out (and initial your cross out) any mandatory arbitration clauses or jury waivers that are presented to you.  Many times the person working with you on the transaction will accept the change and proceed.

Your maximum bargaining position is on the front end.  Once you have signed and agreed, it’s too late.  If they say your change creates a counteroffer, don’t give in.    Ultimately, most companies will want the transaction to go forward and will accept your change. If they won’t, perhaps you should reconsider doing business with them.